Middle East

Bonds, Loans & Sukuk Middle East Awards: The 2018 Winners

This year’s Bonds, Loans & Sukuk Middle East Awards saw no shortage of firsts as the regions borrowers and finance professionals pushed the boundaries of the possible through new structures and techniques in a range of transactions.

Nov 16, 2018 // 12:04AM

The GCC countries (and GCC assets) stood out amongst their emerging market peers for the better part of this year. Sovereign, quasi-sovereign organisations and corporates pushed into new markets through debut transactions, including the region’s first Panda Bond. Many leaned on innovative and scalable conventional and Islamic structures to reboot their balance sheets, bringing them further in line with those found among FTSE100 enterprises, while also enabling them to invest into new projects that have never been undertaken in the Middle East – including the development of the region’s first Waste-to-Energy plant.

With so many high-quality transactions to choose from, this year’s Awards selection was more difficult than ever before. The Market Insights team and GFC Media Group would like to thank all of the finance professionals who nominated transactions for this year’s Bonds, Loans & Sukuk Middle East Awards, and for your tireless efforts in helping borrowers achieve their core objectives and developing new structures and techniques to help push the industry forward.

Congratulations to all of this year’s Awards winners!

One of the largest private sector corporate syndicated loan transactions in the GCC and wider Middle East, this multi-tranche multi-currency transaction allowed GEMS Education to consolidate and refinance its existing debt stock at very attractive pricing, allowing the company to optimise its debt maturity profile, enhance its equity story, and broaden its banking relationship with new regional and international lenders. The deal was a critical milestone in the evolution of GEMS’ funding strategy and the region’s credit markets.

This breakthrough financing of an inbound acquisition into the Middle East, led by investors in China, was structured as a shariah-compliant facility and financed entirely by regional banks in multiple currencies. The acquisition was structured as a holding company facility with no recourse to the acquirer nor tangible collateral, adding to a number of other challenges – the acquiring consortium was neither well-known to the borrowers nor particularly familiar with Islamic finance. Geopolitical challenges (Byrne Group has multiple subsidiaries, including in Qatar) were overcome with structural robustness in this landmark deal.

A rare issuance out of Saudi Arabia featuring a hybrid structure, this transaction was amongst the first few to have tested new law related to the development and issuance of securitisation-type transactions. It is also one of the first such asset-backed sukuk transactions used by a consumer and retail finance provider in Saudi Arabia to tap the capital markets to raise finance.

The fully underwritten acquisition finance facility for the 58.5% stake in Galadari Brothers Co LLC, a diversified business conglomerate with operations spread across multiple business verticals, was executed from mandate to disbursement in just 22 days. The transaction, one of the largest in the region, was part of an AED3bn acquisition package consisting of a mix of the company’s cash balance, bank debt, deferred payment and fixed assets. The well-structured deal included a cash sweep mechanism to ensure the group’s cashflows were carefully monitored, and a performance trigger mechanism ensured banks are compensated for any decline in performance through improved margins and reduced dividend takeout by promoters.

First Abu Dhabi Bank’s debut sukuk was critical for the bank as it was the first capital market transaction since its constituent lenders – National Bank of Abu Dhabi and First Gulf Bank – merged last year. The trade was very well-received, with the bulk of the paper (66%) placed with institutions in the Middle East and more than 250 investors participating with the trade.

The Government of Sharjah’s inaugural Panda Bond – an RMB-denominated bond sold by a non-Chinese issuer within China’s local markets – was both the first ever Panda issued out of the Middle East and the first sovereign Panda issuance of 2018 (only the fifth sovereign globally). The issuance was extremely well-received and successfully achieved all of the government’s objectives by opening up new avenues of funding, introducing the government to Chinese investors, who the government is keen to develop long term relationships with, diversifying its investor base, balancing borrowing costs and showcasing its investor appeal and distinct credit strengths to the global investor community.

One of the first fully non-recourse project financed transaction in Egypt since the late 1990s, ACWA Power’s USD185mn amortising project finance facilities was one of the few transactions where EBRD acted as a hedge party, entering into swaps with the project companies, and a significant achievement given the (near record low) EGP-denominated tariff. The absence of direct government support from China and the lack of ECA participation for a deal of this kind was notable, and the transaction and project are both significant in the context of developing Egypt’s renewable energy sector.

This first ever export advance facility to one of the largest exporters from India structured by a bank out of Middle East, using a TradeCo as an intermediary. The USD369mn pre-export advance facility was structured to include an innovative upfront “true sale” of performance and credit exposure by TradeCo to banks, which also resulted in meaningful cost savings on interest payments on account of lower withholding tax (owed to the progressive tax regime in UAE). The scalability afforded by the structure allows for a ramp-up in volume as well as the number of participants, achieving better economies of scale than a comparable vanilla loan transaction. The deal also paves the way for similar transactions further linking Indian companies to the UAE.

This bespoke sukuk structure embedded in this transaction is based on airtime and includes novel redemption features and an option for investors to exchange the sukuk for shares in VMMEA in the event of an initial public offering. Despite a challenging market backdrop and the complexity of the deal (the instrument included an array of exit options for investors, which made the commercial discussions and drafting mechanisms quite intricate, and included a cross-border element) the mobile virtual network operator managed to attract some of the region’s top investors to this unique transaction, while retaining favourable terms.

In view of the UAE’s Vision 2021, which focuses on among other things environmental improvement and significant waste reduction, Abu Dhabi Future Energy Company PJSC (“Masdar”) and Sharjah Environment Company LLC (“Bee’ah”) led the development and financing of the first multi-fuel conventional Waste-to-Energy centre in the UAE and the GCC more broadly. The lenders used a soft-mini perm feature on the 20-year senior facility, a rarely used structure in the region, to help pave the way for capital markets refinancing. The replicability of this structure, and the fact that it is well-understood by emerging market investors, may help funnel additional non-bank long-term liquidity into the region.

This uniquely structured privately placed sukuk is backed by Islamic aviation assets representing the equity interests and subordinated debt obligation of five lessor SPVs – with each orphan SPV owning a single aircraft leased to UAE-based commercial airlines. The instrument was designed to help meet the specific needs of Islamic investors, enabling them to diversify into an otherwise unreachable asset class, while also opening up a new source of funding for aviation borrowers.

In a deal that marked Majid Al Futtaim’s third hybrid capital market offering, the company’s USD400mn PerpNC8 bond sale was the culmination of a very successful liability management exercise and met with strong demand from a diverse group of global investors. The transaction also features the longest non-call tenor ever by an issuer based in the Middle East, an impressive feat for a non-bank perpetual note issuer.

In addition to being a first for the company, Emirates REIT’s USD400mn sukuk represented the first time any REIT in the Middle East and North Africa region had ever issued Islamic paper, setting an important precedent for the development of the Islamic capital markets more broadly. The hybrid 51% Wakala / 49% Commodity Murabaha structure enabled the borrower sufficient flexibility to prepay existing loans, while other structural enhancements were required to overcome regulatory restrictions related to annual total indebtedness, creating a template for similar DFSA-regulated institutions of similar kind.

Omantel’s inaugural debt capital markets transaction was a resounding success, with the organisation taking advantage of a narrow issuance window amidst a volatile market backdrop to price well inside initial price thoughts. The issuance came on the back of a USD2.25bn debt financing facility undertaken by Omantel to fund the acquisition of 21.9% stake in Zain, with the proceeds of this bond used to refinance the bridge loan component of the earlier transaction, and helping to reinforce Omantel’s strategic foothold in the region’s telecommunications sector.

This syndicated multi-loan facility helped NMC Healthcare go beyond simply refinancing existing debt – it helped the company completely revamp its capital structure, allowing it to move from fully-secured lending to entirely unsecured and giving it a strong platform upon which to enter the capital markets in the future. The transaction was also one of the largest deals of its kind in the healthcare sector in the Middle East.

Last but certainly not least, this transaction was the largest amortising bond issued out of the Middle East, as well as the highest rated, and one of the largest single currency bond offerings of its kind. The transaction featured a dual-tranche offering with repayment profiles and sizing that match the cash flows generated by the underlying assets, offering both institutional and infrastructure investors their first opportunity to partner with ADNOC, and allowing the government-owned company to extract significant value from ADCOP. It could also pave the way for future capital market transactions linked directly with infrastructure assets.

Middle East Deals Islamic Finance CEE & Turkey

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